Let’s talk about ‘paper hands’ – the notorious term used in the trading world to describe investors who are quick to sell their investments at the slightest hint of market volatility.
The term ‘paper hands’ first came about at the r/WallStreetBets subreddit on Reddit. The term gained its popularity in 2021, when the forum promoted a number of meme stocks such as GameStop. The term is represented by toilet paper and upward facing palms emojis. ??
As with either stock or options trading, crypto traders are said to have ‘paper hands’ when they exit a position too early for fear of losing their investment.
Some crypto traders sometimes refer to other crypto traders as ‘paper hands’, even before they have actually exited a position. They are only considering whether to stay in or get out as the pressure builds. So, the term is most frequently used by crypto traders, as they trade in a very volatile sector which requires investors to have the ability to weather market turbulences.
These panic sellers have paper hands that break and crack under the tiniest amount of pressure, hence they are made out of ‘paper’.
So bottom line, the term ‘paper-hands’ refers to risk-averse investors who exit positions at the earliest indications of volatility. While it is important to minimise losses when investing, selling an investment too early can mean that an investor misses out on significant gains.
‘Diamond hands’ on the other hand, are the opposite of ‘paper hands’ and describe someone with a higher risk tolerance who is willing to hold an open position through the most volatile market conditions.
To sum up, ‘paper hands’ may be a common issue in the world of trading, but they don’t have to be your problem. With the right mindset, a solid plan, and a willingness to stay the course, you can avoid the pitfalls of short-term thinking and become a successful long-term trader. So don’t let your emotions get the best of you – keep those paper hands in your pockets, and hold onto your investments with confidence.